SUMMARY
- The “Rule of 72” is a simple formula used in finance to estimate how long it will take to double an investment’s value by dividing 72 by the annual interest rate or annual growth rate.
- Over the past four decades, declining cash yields, proxied by the 3-month Treasury yield, have extended the doubling time for cash investments — particularly during the 7-year period of zero interest rates following the Global Financial Crisis (GFC) and the recent return to zero rates in 2020. As a result, yield seeking investors have been forced to take on increased levels of risk.
- With the Fed embarking on one of the fastest rate-hiking cycles in history, cash investors have found some relief. The 3-month Treasury yield has surged from 0.05% in December 2021 to over 5.4%, marking the highest rate in two decades. This dramatic shift means that investors can now double their investments in just 13.2 years, compared to the 1,440 years it would have taken had rates remained at 0.05%.
DISCLOSURES
The material shown is for informational purposes only. Any opinions expressed are current only as of the time made and are subject to change without notice. This report may include estimates, projections or other forward-looking statements; however, forward-looking statements are subject to numerous assumptions, risks, and uncertainties, and actual results may differ materially from those anticipated in forward-looking statements. As a practical matter, no entity is able to accurately and consistently predict future market activities. Additionally, please be aware that past performance is not a guide to the future performance of any investment, and that the performance results and historical information provided displayed herein may have been adversely or favorably impacted by events and economic conditions that will not prevail in the future. Therefore, it should not be inferred that these results are indicative of the future performance of any strategy, index, fund, manager or group of managers. The graphs and tables making up this report have been based on unaudited, third-party data and performance information provided to us by one or more commercial databases. While we believe this information to be reliable, SpringTide Partners bears no responsibility whatsoever for any errors or omissions.
Index benchmarks contained in this report are provided so that performance can be compared with the performance of well-known and widely recognized indices. Index results assume the re-investment of all dividends and interest. The information provided is not intended to be, and should not be construed as, investment, legal or tax advice. Nothing contained herein should be construed as a recommendation or advice to purchase or sell any security, investment, or portfolio allocation. This presentation is not meant as a general guide to investing, or as a source of any specific investment recommendations, and makes no implied or express recommendations concerning the manner in which any client’s accounts should or would be handled, as appropriate investment decisions depend upon the client’s specific investment objectives.
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